n South African Journal of Economic and Management Sciences - The regulatory treatment of liquidity risk in South Africa
|Article Title||The regulatory treatment of liquidity risk in South Africa|
|© Publisher:||University of Pretoria|
|Journal||South African Journal of Economic and Management Sciences|
|Affiliations||1 North-West University, 2 North-West University and 3 North-West University|
|Publication Date||Sep 2012|
|Pages||294 - 308|
|Keyword(s)||Basel II, G28, Liquidity risk, Regulatory capital and South Africa|
ISI Social Science
The Basel accord describes the regulatory capital requirements for credit, market and operational risk. The accord aims to provide guidelines to level the playing field for all internationally active banks and to protect consumers against these risks. Despite the growing significance to bank solvency of liquidity risk, it is omitted from the new accord. Banks are not required to measure and manage this risk yet they are often considerably exposed to the threat of severely diminished liquidity. This omission from the accord could have dire consequences for banks and the economy in which they operate: liquidity crises can occur without warning and spread quickly to other parts of the financial system. This article critically explores current practices in South Africa and proposes guidelines for effective liquidity risk regulation.
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